City handed post-Brexit boost as Hunt strikes trade deal with …
Jeremy Hunt has handed the City a post-Brexit boost by agreeing a trade deal with Switzerland.
The Treasury on Wednesday announced a new financial services agreement that will reduce costs for UK businesses accessing the Swiss market and vice versa.
The UK-Swiss deal will be signed in Bern on Thursday by Mr Hunt and Karin Keller-Sutter, head of Switzerland’s federal department of finance.
It marks a further boost to the City as Mr Hunt slashes red tape in hopes of increasing the competitiveness of Britain’s financial services industry following Brexit.
The Bern Financial Services Agreement means each country will recognise the other’s domestic laws and regulations on financial services.
It is expected to make it easier for financial companies to offer cross-border services relating to insurance, banking, asset management and capital market infrastructure.
The bilateral agreement, which will simplify operations for companies and wealthy clients in both countries, comes more than three years after the then-chancellor Rishi Sunak launched negotiations in June 2020.
Mr Hunt on Thursday will claim that leaving the EU has allowed Britain to negotiate independent deals with major financial hubs, the Financial Times first reported.
The Treasury said: “The Bern Financial Services Agreement is only possible due to new freedoms granted to the UK following its exit from the EU.”
The UK risked losing the benefit of pre-Brexit trade agreements between the EU and Switzerland, which is not a member of the bloc.
Leaving the 27-member bloc meant that Britain faced being relegated to a third country and stripped of most access rights.
The new deal will permanently restore the UK’s access to Switzerland’s financial sector following Brexit, creating the possibility of a wider trade deal.
The Treasury said: “This relationship is underpinned by a commitment to international standards and a shared belief in the value of open and resilient financial markets.”
Switzerland is the UK’s third largest partner outside of the EU, after the US and China. Swiss banks manage approximately nearly £3 trillion in international assets.
According to the Treasury, UK trade in financial and insurance services with Switzerland reached £3.28bn in 2022.
Read the latest updates below.
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Signing off
Thanks for joining us today. Chris Price will be back in the morning but I’ll leave you with some of our latest business stories at The Telegraph:
- We won’t sacrifice growth for environmental concerns, says billionaire Louis Vuitton heir[3]
- Millions face festive disruption as BT scrambles to rip out Huawei tech[4]
- Mike Ashley’s Frasers buys Matchesfashion for £52m[5]
BAE Systems wins US Navy contract
BAE Systems has won a five-year contract to operate air traffic control and landing systems for the US Navy.
The deal, worth $92m (£73m), will also involve the British defence giant supporting the US Marine Corps, Military Sealift Command and coast guard.
The contract, which BAE originally won in 1993, also includes software development and maintenance, with the work carried out in Maryland, Virginia and California.
BAE said it was proud to have spent 30 years helping the US “bolster their readiness”.
It follows the award earlier this month of a $8.8bn (£6.9bn) contract with the US Army to continue operating an ammunition plant in Tennessee over the next decade.
Shares in the defence giant were up 2.2pc today.
Fresh investigation into collapsed London law firm Axiom Ince
The Legal Services Board (LSB) has become the latest regulator to launch an investigation into the collapse of London law firm Axiom Ince. Here’s our reporter Adam Mawardi:
The oversight body on Wednesday said it will examine the events leading up to the Solicitors Regulation Authority’s (SRA) decision to shut down the scandal-hit law firm in October.
The LSB, sponsored by the Ministry of Justice, will consider the SRA’s handling of the case, including whether it followed correct policies and procedures.
Decisions made by the SRA, which regulates the professional conduct of more than 200,000 solicitors in England and Wales, will also be under scrutiny. The SRA plans to fully cooperate with the review.
The LSB’s independent review follows criticism that SRA failures meant that the disappearance of client funds were discovered too late.
Axiom Ince’s former managing partner, Pragnesh Modhwadia, admitted to the High Court in September that most of the missing funds had already been spent.
He confirmed that client monies were used to acquire two law firms in pre-pack administration deals earlier this year, including £2.2m for the Ince Group, once London’s largest listed law firm.
Mr Modhwadia also spent cash purchasing six properties and redeveloping seven others, according to an affidavit with the High Court.
Axiom Ince was closed by the SRA at the start of October, the day after the law firm announced plans to appoint administrators.
The full scope of its independent review will be announced in January, with plans to publish any findings and recommendations in the spring.
The LSB’s review, conducted with the help of Northern Ireland law firm Carson McDowell, is understood to be an assurance and learning exercise, with potential enforcement action not considered at this stage.
An SRA spokesman said: “We look forward to working with the LSB and Carson McDowell on this review.”
Citi thinks UK inflation could drop below 2pc by May
The investment bank Citi believes inflation will likely fall below the Bank of England’s target of 2pc by May but warns that our central bank is likely to engage in “overtightening”.
It says:
Today’s data is good, substantive news. The reduction in services inflation leave these data 60bps [basis points] below the MPC’s [Monetary Policy Committee’s] November profile.
Some drivers here are idiosyncratic – including the reduction in airfares. But these data suggest momentum in the services complex is continuing to moderate.
On goods, we are cautious of overinterpretation given the uncertainty around Black Friday – although moderation in items such as cars we think reflects more widespread easing of previous supply constraints.
For now, the key question is whether the MPC trust these data enough to begin to move away from previous conclusions that inflation is embedded.
For now, we expect the MPC are more likely to cry ‘bah humbug.’
But with inflation now we think likely to fall below 2% in May, the risk of cuts in Q2 are growing. And regardless, a high burden of proof for cuts means overtightening remains the most likely scenario
Strong day for the Footsie
The Footsie grew today, with its large-cap index, the FTSE 100, up 1.02pc. The biggest riser was testing company Intertek, up 3.66pc, followed by property company Segro, up 3.23pc. The biggest fallers were NatWest, down 0.46pc, followed by Rightmove, down 0.21pc.
The mid-cap FTSE 250 was up 1.62pc, with magazine publisher Future leading the pack, up 6.00pc, followed by Great Portland Estates, up 5.74pc. Biggest fallers were Diversified Energy, down 3.52pc, followed by Wag Payment Solutions, down 3.41pc.
Electric scooter start-up Bird files for bankruptcy
An electric scooter start-up once valued at $2.5bn (£2bn) has filed for bankruptcy in the US. Our reporter Matthew Field has the details:
Bird, which became the fastest start-up ever to achieve $1bn unicorn status five years ago, has said it has launched a “financial restructuring process” to safeguard the business.
Founded by former Uber executive Travis VanderZanden in 2017, Bird was among the first e-scooter rental companies to expand globally.
Bird’s initial success sparked a flurry of rivals as venture capital investors ploughed billions of dollars into the so-called “micromobility” sector.
Dockless e-scooters, hired using a smartphone app, subsequently flooded the streets of hundreds of US and European cities.
However, e-scooters’ popularity prompted complaints as they blocked pavements and sparked safety concerns.
Bird attempted to launch in the UK several years ago but its scooters never went further than limited trial areas – one of which was in London’s Olympic Park.
As part of the bankruptcy, Bird will receive $25m in loans from investors, which includes US private equity giant Apollo.
Michael Washinushi, Bird’s interim chief executive, said: “We are making progress toward profitability and aim to accelerate that progress by right-sizing our capital structure through this restructuring.”
Bird scooters parked by the side of the street in Reno, Nevada
Credit: Ty O’Neil/Getty Images
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Prada buys flagship New York store for $425m despite luxury slowdown
Prada has agreed to buy the building that hosts its flagship New York store on Fifth Avenue for $425m (£336.3m). Riya Makwana reports:
The Italian fashion brand has purchased the 12-storey building at 724 Fifth Avenue[12], where Prada has rented since 1997, from property mogul Jeff Sutton.
“The board believes that the property’s location offers high strategic value being characterised by increasing scarcity and long-term potential,” Prada said in its statement.
New York’s Fifth Avenue, which runs through Midtown Manhattan, is the world’s most expensive retail street, according to property company Cushman & Wakefield. Brands with shops on the road include Armani, Cartier and Gucci.
Prada’s significant investment in the area comes despite a global downturn in luxury sales, as high interest rates and slowing growth hit the world’s wealthy.
Prada’s sales in the US have dropped by 1.3pc during the first nine months of the year.
US credit card data from Barclays showed that spending on luxury goods declined in November, just a month before Christmas. Sales were down by 15pc year on year.
Analysts at Barclays said the data “doesn’t bring much optimism” for trade in the run up to Christmas.
The Prada store on Fifth Avenue in New York
Credit: Richard Levine/Getty Images
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Ikea warns of delays from Houthi militant attacks in the Red Sea
Ikea has said that it faces delays in some products as it looks to reroute goods away from the Red Sea, after attacks by Houthi militants on ships passing through the waters.
“What we can share for now is that the situation in the Suez Canal will result in delays and may cause availability constraints for certain Ikea products,” Oscar Ljunggren, a spokesperson for Ikea, told Bloomberg.
The Swedish flat-pack furniture giant said that it was looking for other options for routing goods from Asian factories to its European markets.
The company said it was working with shipping providers “to ensure the safety of people working in the Ikea value chain and to take all the necessary precautions to keep them safe.”
Spain hits back at Saudi stakebuilding in Telefonica
The Spanish government is planning to buy a €2bn (£1.7bn) stake in Telefonica as it steps up defences against stakebuilding by Saudi Arabia. James Warrington reports:
SEPI, Spain’s state holding company, will buy as much as 10pc of the telecoms giant to provide “greater shareholder stability”.
It added that the move would help to safeguard the company’s “strategic capabilities”.
Telefonica, which co-owns Virgin Media O2 with Liberty Global, said in response to the announcement that it remained focused on executing its recently announced strategic plan.
Shares in the telecoms group jumped as much as 7pc on Wednesday.
Spain’s rearguard action comes after Saudi Telecom (STC) revealed in September that it had spent €2.1bn amassing a stake in Telefonica.
This consists of a 4.9pc shareholding and financial instruments giving it another 5pc in so-called economic exposure.
STC, which is majority-owned by Saudi Arabia’s sovereign wealth fund, reportedly plans to convert this into a 9.9pc stake, which would make it Telefonica’s biggest shareholder.
The move has sparked concerns in Spain, which has been considering rolling out restrictions on the Gulf state’s investment plans.
Spanish Prime Minister Pedro Sanchez has said the Government will not allow foreign investors to have “undue influence” over strategic companies.
Slug & Lettuce owner bags new financing agreement
Britain’s biggest pub chain Stonegate is raising £638 million through a fresh financing agreement, according to a Bloomberg report.
The Slug & Lettuce owner, created in 2010 by TDR Capital, who also co-own Asda, is reportedly splitting out 1,000 pubs into a separate company known as a special purpose vehicle in order to raise the funds, which are expected to be from Apollo Global Management.
A Slug and Lettuce bar in Colchester
Credit: John Keeble/Getty Images
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Ocado leads the FTSE 100 with 12-day rally
The online supermarket and logistics group Ocado is leading the risers in the FTSE 100 today, the 12th day in a row that it has pushed higher. Shares have reach 795.8p
The company, which hit an all-time high at 2,819p in October 2020 as the Covid pandemic continued to bite, has been gaining traction selling its expertise and distribution skills to other retailers, even outside of its core grocery sector.
However, its original UK retail business, which it now owns jointly with M&S, is struggling, with 2022 revenues declining slightly as customers have faced inflationary pressures.
Consumer confidence data supports the idea we’re heading for a soft landing
How effective will central bankers be in preventing a recession while squeezing out inflation? The latest data from The Conference Board, a business think tank founded in 1916, suggests that America might be on track for a soft landing – despite a period of high interest rates. Will Britain mirror this?
The research found that US consumers are feeling more confident than they did in the summer, and that their confidence has grown for the second month on the trot.
The Bank of England has taken a more cautious approach to inflation than the US Federal Reserve, but today’s inflation figures are encouraging the markets to anticipate interest rate cuts sooner than previously expected.
Michael Hewson, chief market analyst at CMC Markets UK, said:
Markets are currently pricing in the prospect of rate cuts next year, even with headline inflation still well north of the central bank’s 2pc inflation targets. That may well happen; however, the degree of cuts being priced could well be where markets come unstuck, especially since the move back to 2pc from current levels may prove to be the hardest part of the journey.
Nonetheless there is no reason to suppose that stock markets won’t maintain the resilience seen through 2023, with the FTSE100 having strong support at 7,200 which needs to hold to maintain the outlook for further gains on a move through 7,750 and revisit the highs this year at 8,046.
Handing over
It’s been an eventful one and at this point I’ll head for home and hand you over to the furious-typing Alex Singleton.
I’ll leave you with a quick look at data showing American consumers are feeling more confident than they have since summer ub good news for businesses with the all-important Christmas shopping season reaching its peak.
The Conference Board, a business research group, said that its consumer confidence index rose for the second straight month, to 110.7 in December from 101 in November. That’s much better than analysts’ forecasts of 104.5.
It seems Americans have a positive view on the state of their economy:
Consumer confidence rose to a 5-year high.
BUT what caught my eye was how much Americans’ perspective of the economy’s present state jumped this month.
Up 12 pts, the biggest monthly jump since May 2021. pic.twitter.com/SgFjqdFBwF[19]
— Callie Cox (@callieabost) December 20, 2023[20]
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US home sales rise amid easing mortgage rates
Sales of previously occupied US homes rose in November, ending a five-month slide, as easing mortgage rates encouraged homebuyers.
Existing home sales rose 0.8pc last month from October to a seasonally adjusted annual rate of 3.82m, the National Association of Realtors said.
It tops the 3.78m sales pace economists were expecting, according to FactSet.
Sales were still down 7.3pc compared with November last year.
The pickup in sales helped push up home prices compared with a year earlier for the fifth month in a row. The national median sales price rose 4pc from November last year to $387,600.
Lawrence Yun, the NAR’s chief economist, said: “Home sales always respond to lower interest rates.”
It comes as the average rate on a 30-year mortgage has eased after climbing to 7.79pc in late October to its highest level since late 2000. The average dropped to 6.95pc last week, according to mortgage buyer Freddie Mac.
United States Mortgage Ratehttps://t.co/ByLQtXPixB pic.twitter.com/kOLnzHd51K[22][23]
— TRADING ECONOMICS (@tEconomics) December 20, 2023[24]
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Lenders gear up for ‘mortgage January sale’ as inflation falls below 4pc
Mortgage lenders are gearing up to cut rates further in January as falling inflation raises hopes[26] that the Bank Rate will come down faster than expected next year.
Senior money writer Fran Ivens has the details:
Inflation fell to 3.9pc in November[27], according to the latest data from the Office for National Statistics, the lowest rate in two years. The figure is down from 4.6pc in October.
As a result lenders are expected to drop their fixed mortgage rates further over the coming weeks and into the new year, with some already taking the plunge[28].
Lender Generation Home will tomorrow introduce the first sub-4pc fixed mortgage rate since Liz Truss’ government. The deal is a 3.99pc five-year fixed rate for those with a 40pc deposit, and is part of cuts that the lender is introducing across its mortgages.
Read which other lenders have announced reductions[29].
Wall Street slides at the open
The main US stock indexes opened lower as investors took a breather from a rally that was sparked by the Federal Reserve’s likely pivot to interest rate cuts next year.
The Dow Jones Industrial Average fell 37.79 points, or 0.1pc, at the open to 37,520.13.
The S&P 500 opened lower by 3.64 points, or 0.1pc, at 4,764.73, while the Nasdaq Composite dropped 29.86 points, or 0.2pc, to 14,973.36 at the opening bell.
Government borrowing costs plummet as inflation falls sharply
The cost of Government borrowing has fallen to its lowest level since April after a larger than expected fall in inflation made markets bet on large interest rate falls.
Bond yields have plummeted in the wake of the sharp drop in the consumer prices index[32] from 4.6pc to 3.9pc in November, which has raised hopes of interest rate cuts early next year.
The benchmark 10-year UK bond yield dropped to as low as 3.51pc from 3.64pc the previous day, its lowest level since April.
The two-year Government gilt, which is sensitive to changes in interest rate expectations, has plunged from 4.24pc to as low as 4.06pc.
Bond prices move inversely to yields, which are the return the Government promises to pay buyers of its debt.
The inflation data has fuelled bets by traders that interest rates will fall sharply as a result, with money markets pricing in five interest rate cuts to 4pc by November next year.
Grant Fitzner, chief economist at the ONS, described the drop in inflation as “good news for a change”.
Chancellor Jeremy Hunt said: “Alongside the business tax cuts announced in the Autumn Statement this means we are back on the path to healthy, sustainable growth.”
Rishi Sunak slapped down by watchdog for claiming public debt is falling
Rishi Sunak has been criticised by the statistics watchdog after he claimed public sector debt is falling.
Our political correspondent Dominic Penna has the details:
The Prime Minister said “debt is falling” in a video posted to his Twitter account last month and also told MPs “we have indeed reduced debt” during Prime Minister’s Questions on Nov 22[34], the day of the Autumn Statement.
However, Sir Robert Chote, chairman of the UK Statistics Authority, highlighted the fact that national debt has continued to rise, and warned Mr Sunak he risks “undermining trust” in how the Government uses data.
“Members of the public cannot be expected to understand the minutiae of public finance statistics and the precise combination of definitional choices that might need to be made for a particular claim to be true,” Sir Robert said.
See how debt is forecast to rise[35].
Rishi Sunak at a Parliamentary Liason Committee hearing on Tuesday
Credit: AFP
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World’s largest offshore wind farm gets go-ahead off UK coast
The UK’s leading offshore wind developer has agreed to push ahead with plans for its flagship project off the coast of Norfolk.
Ørsted, the Danish renewable energy giant, had been understood to be in talks with the Department for Energy Security and Net Zero about securing more generous subsidy arrangements for its Hornsea 3 wind farm project.
The company has taken the final investment decision on the scheme, which will see 231 turbines installed off the coasts of Norfolk and Lincolnshire, generating power for 3m homes. It is expected to be completed by the end of 2027.
Subsidies for Hornsea 3 were agreed with the Government last year through contracts for difference (CfDs), with operators guaranteed a minimum price per megawatt hour (MWh) known as the strike price. Ørsted was promised £37.35.
It will support up to 5,000 jobs during its construction phase, with up to a further 1,200 permanent jobs both directly and in the supply chain in the long operational phase.
Ørsted chief executive Mads Nipper said:
Offshore wind is an extremely competitive global market, so we also welcome the attractive policy regime in the UK which has helped secure this investment.
We look forward to constructing this landmark project, which will deliver massive amounts of green energy to UK households and businesses and will be a significant addition to the world’s largest offshore wind cluster.
Ørsted will build the world’s largest offshore wind farm off the coast of Norfolk
Credit: AP Photo/Julia Nikhinson
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Gas prices rise amid Red Sea tensions
Gas prices have edged higher as uncertainty remains over the shipping of good through the Red Sea.
Europe’s benchmark contract for wholesale gas has edged up 1.4pc today to more than €33 per megawatt hour.
The UK equivalent has gained about 2pc.
Rail freight to grow by 75pc in 27 years under Government targets
An “ambitious” target of growing rail freight by at least 75pc by 2050 has been set by Transport Secretary Mark Harper.
The Cabinet minister said this will lead to economic and environmental benefits. Rail industry body Rail Partners previously called for an ambition of trebling rail freight by 2050.
Mr Harper believes setting a target for increasing the amount of goods moved by train will encourage more private sector investment in the sector.
One freight train can replace up to 129 lorries, while moving a tonne of freight by rail produces a quarter of the carbon emissions compared with road transport, according to the Department for Transport.
Mr Harper said:
Rail freight helps keeps this country moving, ensuring our supermarket shelves are stocked and materials are supplied to our construction workers.
Not only is it the most efficient and environmentally friendly way of transporting many goods, but it helps grow the economy across the country.
This ambitious plan demonstrates this Government’s confidence in the rail freight sector, and I hope it encourages businesses to capitalise on the extra opportunities, so the industry continues to thrive and deliver for our country.
Transport Secretary Mark Harper wants rail freight to grow by 75pc by 2050
Credit: Transport/Alamy Stock Photo
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LadBible owner cheers growth in audience
The media group which owns digital publisher LadBible has revealed it is expecting a jump in sales and earnings over 2023 after building its audience and advertisers.
Manchester-based LBG Media, which also owns brands SportBible, Tyla and UniLad, said it was performing well in the UK and Ireland despite profits dragging in Australia.
Social media followers across its brands have surged to more than 440m, up from 410m in June, the group revealed.
The youth publisher said it expects to report revenue growth from nearly £63m last year to about £67m this year.
Meanwhile, adjusted earnings are set to have grown by about 8pc from £15.7m in 2022 to at least £17m in 2023.
LadBible was launched by friends Solly Solomou and Arian Kalantari while studying at university in 2012, aged 21.
The London-listed group spans social media platforms including Facebook, Instagram, X and TikTok with a predominantly young audience of 18 to 34-year-olds.
The term “lad” is described as an “everyday hero” and gender neutral term by the company, with women making up about 40pc of its audience.
LadBible’s owner expects to have improved sales and profits this year
Credit: True Images/Alamy Stock Photo
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Wall Street on track to open lower
US stock markets inched lower in premarket trading after a rally that was sparked by the Federal Reserve’s likely pivot to a dovish policy.
All the three main indexes have advanced over 2pc since the Fed held interest rates steady earlier this month, projecting lower policy rates by the end of 2024.
Blue-chip companies on the Dow Jones Industrial Index have hit record highs every other day since and the S&P 500 is within reach of its highest closing levels since January 2022.
Chicago Fed President Austan Goolsbee tried to keep euphoria in check this week as he said further progress on beating back inflation will be the decisive factor in any decision next year to reduce interest rates.
Still, traders expect the Fed to ease credit conditions by more than 125 basis points by September next year, with a 71.1pc chance that the first quarter of a percentage point cut could come in as early as March.
Ahead of the opening bell, Dow Jones and S&P 500 futures were down 0.2pc, while the Nasdaq 100 had lost 0.3pc.
German bunds drop below 2pc for first time since March
It is not just UK bonds enjoying a rally today amid hopes of interest rate cuts next year.
Germany’s 10-year bund yield dropped below 2pc for the first time in nine months after figures showed producer prices fell by more than expected in November.
Meanwhile, US Treasury yields have fallen to 3.89pc.
Italy’s bond yields edged downward below 3.6pc, having fallen by more than 73 basis points in the last month as markets increasingly bet on interest rate cuts by the US Federal Reserve and European Central Bank early next year.
10y German Bund yields have dropped